Power sector debt repayment: eight IPPs serve demand notices on PPIB

Eight Independent Power Producers (IPPs) which had invoked GoP guarantees a month ago, lodged a protest, saying no action had yet been taken for clearing their dues, sources in Ministry of Water and Power told Business Recorder on Thursday. They are learnt to have filed demand notices to the Private Power Infrastructure Board (PPIB) on Thursday.
According to the terms of sovereign guarantees, GoP is bound to pay outstanding dues within 10 days of demand notice. The Ministry of Water and Power had repeatedly shifted responsibility for clearing dues on the Finance Ministry, saying that if the latter co-operates with the power sector, the situation would be different in terms of IPPs issues as well as power shortages.
The eight IPPs are: Atlas Power, Liberty Power Tech, Nishat Chunian, Nishat Power, Orient Power, Sapphire Electric Company, Halmore Power and Saif Power limited. Rousche Power. So far nine IPPs have served demand notice on PPIB. These IPPs have already defaulted on debt repayment to banks due on March 31 this year and their operational capacity had massively been hit by non-availability of credit to purchase fuel to run plants.
Recently, the Energy Summit held in Lahore under the chairmanship of Prime Minister, Syed Yousaf Raza Gilani vowed to resolve payment issues of IPPs, but there was no progress in this regard. Punjab Chief Minister Mian Shahbaz Sharif has also taken on the federal government for not honouring the decisions taken during the Energy Summit.
The demand notice says: " The amount specified in the notice is due and payable by the power purchaser (NTDC) under the power purchase agreement between the company and the power purchaser. Demand in writing for payment from the power purchaser was delivered to the power purchaser on or after the date payment was due ... Notice of such non-payment was delivered to the guarantor not less than 30 days prior to the date thereof; and such amount, on the date hereof, remains unpaid by the power purchaser." A power sector analyst told this correspondent that IPPs were facing a very odd situation. On the one hand, if IPPs stop generation because of non payment, government stops guaranteed capacity payments meant to clear payments of banks. On the other, the government is not paying outstanding dues.
"I acknowledge non-payment to the IPPs is now hurting the banking industry as banks maintain that their exposure to the power sector has already reached 30 percent of total investment and are refusing further exposure," he added. The government has injected above Rs 1 trillion in the power sector over thew past four years on account of subsidy and line losses which power sector analysts portray as incompetence of policymakers. Two key economic managers - Finance Minister, Dr Abdul Hafeez Shaikh and Secretary Finance, Wajid Rana - are currently in Washington to attend IMF and World Bank's spring meetings.